Ripples Advisory, Tata Motors stock down 5%
Ripples Advisory, Tata Motors stock down 5% on likely 1.2 bn pound JLR loss due to Brexit, but Nomura sees 89% upside
Nomura has maintained Buy call on Tata Motors with a target price of Rs 495, implying a 85 percent potential upside.
Tata Motors share price plunged as much as 5.4 per cent in morning to hit a fresh 52-week low of Rs 252.55 on Thursday as investors worried about likely loss to the company due to Brexit.
Britain's biggest carmaker Jaguar Land Rover (JLR) said on Wednesday a so-called "hard Brexit" would cost it 1.2 billion pounds ($1.59 billion) a year, curtailing its future operations in the United Kingdom.
"We urgently need greater certainty to continue to invest heavily in the UK and safeguard our suppliers, customers and 40,000 British-based employees," JLR's Chief Executive Ralf Speth said in a statement.
Speth's comments come ahead of a meeting this Friday between Prime Minister Theresa May and her cabinet ministers to decide on strategy for Britain to negotiate its way out of the European Union, ending a 40-year trading relationship.
Because of uncertainty about what Britain actually wants from the EU after it leaves, the outcome of the cabinet meeting is seen as critical to progress in talks with the EU on the issue.
"A bad Brexit deal would cost Jaguar Land Rover more than 1.2 billion pounds in profit each year. As a result, we would have to drastically adjust our spending profile; we have spent around 50 billion pounds in the UK in the past five years - with plans for a further 80 billion pounds more in the next five," Speth said in a statement.
"This would be in jeopardy should we be faced with the wrong outcome."
In fact, the stock has been under pressure throughout the year, falling more than 40 per cent in 2018 so far, on top of 8.5 per cent loss in a previous calendar year. The loss likely due to Brexit and continued earnings concerns due to JLR (though domestic business has been improving) added pressure on the stock.
The consistent correction made the stock attractive for the brokerage houses which are still bullish on the company on hopes of big earnings improvement in JLR on likely launches going ahead.
Nomura has maintained Buy call on Tata Motors with a target price of Rs 495, implying a 85 percent potential upside.
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